Optimising promotional pricing: Data-driven strategy for enhanced ROI

PE backed Retailer with €1.3bn annual turnover were interested in increasing their promotion visibility and optimising their promotions to increase sales and margins for the business.

The Challenge

The PE backed retailer sought to enhance their promotional strategy and approached us to help unlock greater value from their promotional investments:

Limited Promotional Visibility

• No visibility and tracking of promotional performance across their product range, making it difficult to identify patterns and trends.

• Unable to distinguish between promotions that generated genuine incremental sales versus those that merely shifted purchase timing.

Opportunity for Data-Driven Decision Making

• Promotional decisions were made based on experience and historical precedent, with an opportunity to supplement this with data-driven insights.

• No standardised framework for comparing different promotion types (price reductions, multi-buy offers, cashback schemes) to identify optimal approaches.

• Limited visibility into how promotions of specific products affected sales of related items, with opportunity to better understand genuine incremental sales versus cross-product effects.

The retailer recognised these areas as opportunities to optimise their promotional strategies and maximise ROI on their substantial promotional investment through enhanced analytics capabilities.

The Solution

Dataset Creation and Feature Engineering

Created a comprehensive promotional dataset capturing transaction-level data across stores, including promotion types, discount depths, product categories, store characteristics, and baseline sales/margin patterns. Engineered features to capture cannibalisation effects (reduced sales of other products) and halo effects (increased sales of complementary items).

Four-KPI Analytics Framework

Analysed four critical performance indicators:

• Sales Uplift %: Incremental volume driven by promotions.

• Margin Uplift %: Net margin impact after promotional costs.

• ROI: Return calculation incorporating incremental margin, halo effects, and cannibalisation impacts.

• Customer Base Penetration: Whether promotions attracted new customers or increased basket frequency.

Advanced Data Analysis

Conducted analysis across store size, regional variations, and competitive effects to identify promotional effectiveness patterns previously hidden from the business.

Interactive PowerBI Visualisation

Developed a comprehensive dashboard enabling exploration of promotional performance across time periods, product categories, and store segments. The dashboard separated price effects from volume effects, showing both immediate promotion impact and longer-term customer behavior effects.

The Results

Immediate Business Transformation

The analytics provides comprehensive visibility into promotional performance, enabling buying and commercial teams to understand success drivers and supplement expertise with data-driven insights.

Systematic A/B Testing

Analysis enabled structuredA/B testing across three critical areas:

• Promotion mechanisms: Testing 1+1 offers vs cashback vs cut-price to identify optimal approaches for different products

• Product category optimisation: Systematic testing across supplier brands and categories to maximise promotional effectiveness

• Leaflet composition: Testing different SKU quantities in promotional leaflets to optimise customer engagement and basket penetration

Quantifiable ROI Opportunities

Analysis identified significant opportunities for promotional ROI improvement, with initial findings suggesting potential for an increase in promotional margin of €3.4m enhancement through optimised strategies and eliminating unprofitable promotions.

Foundation for Advanced Capabilities

Building on this foundation, we will develop a predictive promotional costing tool enabling traders to forecast ROI before implementation. We will also expand halo and cannibalisation logic to provide more sophisticated cross-product insights, further amplifying business impact through proactive optimisation.